Changes are coming to your FICO score
Your credit score is 1 of 7 factors that affect your mortgage rate. FICO recently announced a new version of the FICO score, a 3-digit number that assesses a person’s credit risk. Previously, FICO scores were calculated by taking a snapshot of a person’s payment history. The new model will take a historical view of payments over time and can process much more information, including account balances for the previous two years. The development of this new model was aimed to give lenders more insight into how individuals are managing their credit.
This change is will affect an estimated 80 million consumers! Those affected will see a shift of 20 points or more. Of those, about half will see scores go up, and the other half will see their scores drop.
Whose score is likely to go down?
- Those who have a high amount of credit card debt relative to their overall credit
- Those who have recently missed payments
- Those who consistently keep a balance
Whose score is likely to go up?
- Those who make on-time payments
- Those who don’t carry high balances
- Those who pay their credit cards off monthly
How can this change affect my rates?
If you or someone you know is on the fence about purchasing or refinancing a home, NOW is the time to act! Before this adjustment makes it difficult for you to reach your financial goals.